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A Theory of Factor Allocation and Plant Size

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  • Thomas J. Holmes
  • Matthew F. Mitchell

Abstract

In this paper we develop a theory of how factors interact at the plant level. The theory has implications for: (1) the micro foundations for capital skill complementarity (2) the relationship between factor allocation and plant size and (3) the effects of trade and growth on the skill premium. The theory is consistent with certain facts about factor allocation and factor price changes in the 19th and 20th centuries.

Suggested Citation

  • Thomas J. Holmes & Matthew F. Mitchell, 2003. "A Theory of Factor Allocation and Plant Size," NBER Working Papers 10079, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:10079
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    1. Jeremy Atack & Fred Bateman & Robert A. Margo, 2000. "Rising Wage Dispersion Across American Manufacturing Establishments, 1850-1880," Vanderbilt University Department of Economics Working Papers 0036, Vanderbilt University Department of Economics.
    2. Aghion, Philippe & Howitt, Peter & Violante, Giovanni L, 2002. "General Purpose Technology and Wage Inequality," Journal of Economic Growth, Springer, vol. 7(4), pages 315-345, December.
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    6. Todd Idson, 2000. "Employer Size Effects in Russia," William Davidson Institute Working Papers Series 300, William Davidson Institute at the University of Michigan.
    7. Griliches, Zvi, 1969. "Capital-Skill Complementarity," The Review of Economics and Statistics, MIT Press, vol. 51(4), pages 465-468, November.
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    Cited by:

    1. Ana Cardoso & Shoshana Neuman & Adrian Ziderman, 2010. "Wage Mobility in Israel: The Effect of Sectoral Concentration," Journal of Labor Research, Springer, vol. 31(2), pages 146-161, June.
    2. Gavilan, Angel, 2012. "Wage inequality, segregation by skill and the price of capital in an assignment model," European Economic Review, Elsevier, vol. 56(1), pages 116-137.
    3. repec:bla:reviec:v:25:y:2017:i:1:p:108-131 is not listed on IDEAS
    4. Graetz, Georg & Feng, Andy, 2014. "Rise of the Machines: The Effects of Labor-Saving Innovations on Jobs and Wages," Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100401, Verein für Socialpolitik / German Economic Association.
    5. Stijepic, Damir, 2013. "Successive Technical Change and the Demand for Skill," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79870, Verein für Socialpolitik / German Economic Association.
    6. Kurokawa, Yoshinori, 2010. "Fixed cost, number of firms, and skill premium: An alternative source for rising wage inequality," Economics Letters, Elsevier, vol. 108(2), pages 141-144, August.
    7. repec:pri:cepsud:113krusell is not listed on IDEAS
    8. Yoshinori Kurokawa, 2014. "A Simple Model of Competition Policies, Trade, and the Skill Premium," Tsukuba Economics Working Papers 2014-002, Economics, Graduate School of Humanities and Social Sciences, University of Tsukuba, revised Sep 2017.
    9. Thomas Holmes, 2004. "EconomicDynamics Interviews Thomas Holmes on Dynamic Economic Geography," EconomicDynamics Newsletter, Review of Economic Dynamics, vol. 6(1), November.
    10. Damir Stijepic, 2016. "Small Employers, Large Employers and the Skill Premium," Economics Bulletin, AccessEcon, vol. 36(1), pages 381-387.
    11. Richard Walker, 2005. "Superstars and Renaissance Men: Specialization, Market Size and the Income Distribution," CEP Discussion Papers dp0707, Centre for Economic Performance, LSE.
    12. Walker, Richard, 2005. "Superstars and renaissance men: specialization, market size and the income distribution," LSE Research Online Documents on Economics 19880, London School of Economics and Political Science, LSE Library.

    More about this item

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General

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